Signaling in a world of information overload and cheap fakes

Signaling theory depicts how resource seekers indicate the quality of their hidden attributes to resource holders and is one of the foundational theories on economic interactions. It rests on the notion of signal costs, where resource seekers with high quality hidden attributes employ signals that would be prohibitively costly to send for senders with low-quality attributes, thus allowing resource holders to identify high-quality resource seekers.

Yet signaling theory was developed in a pre-digital world, it rests on the assumption that resource holders can identify, perceive, process, and trust in signals. Now, we live in a world where signal receivers are flooded with informational input and where largely everything transmitted via digital media can be easily faked. The concept of signal costs has shown to be problematic in such a world, as it can no longer be taken for granted that signals are identified, perceived, processed, and trusted, eroding the conceptual fundament of a central mechanism in information economics and many fields of management and economic theory.

Yet how does signaling work in a world of information overload and “cheap fakes”, which mechanisms make signals relevant for receivers? In this project, I propose to address these questions and develop an overdue update to signaling theory.